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Global funding agency International Finance Corporation (IFC), along with its associated entities, has made equity investment in Federal Bank to promote green recovery.

The investment is expected to improve access to finance for the small businesses.

"Increased financing for climate-friendly projects as well as more financing for small businesses to help accelerate India's economic recovery from Covid-19 are expected in the wake of a $126 million (Rs 916 crore) equity investment in Federal Bank, one of the country's leading private sector banks," an official statement said.

Accordingly, IFC, along with two investment funds managed by IFC Financial Institutions Growth Fund, and IFC Emerging Asia Fund, has made an equity investment for a 4.99 per cent stake in Federal Bank Limited (FBL).

"The investment will also support FBL's commitment to environmental, social and governance (ESG) standards, while strengthening its Tier 1 capital adequacy ratio (CAR) and expanding its micro, small and medium sized enterprises (MSME) and climate finance portfolios -- which are key for growth opportunities as the country recovers from the pandemic," the statement said.

The equity investment is also expected to see Federal Bank grow and strengthen its ESG portfolio, with increased green portfolio financing for projects including energy efficiency, renewable energy, climate smart agriculture, green buildings, and waste management.

At present, India ranks third globally in terms of greenhouse-gas (GHG) emissions, with the country needing substantial investments to meet its goals under the Paris Agreement to reduce GHG emissions by 2030.

IFC estimates a total climate-smart investment opportunity of $3 trillion in India through to the year 2030.

"The investment is also expected to create thousands of jobs with MSMEs gaining access to much-needed financing, which will also help ensure an inclusive recovery," Roshika Singh, Acting Country Manager for IFC in India, was quoted as saying in the statement.

"With Federal Bank's focus on ESG, IFC will also consult with the bank on developing a new Environmental and Social Management System (ESMS) that will be applied to its entire portfolio. To further strengthen FBL's environmental and social sustainability capacity, IFC will also implement an E&S technical advisory programme," the statement said.